February 5, 2014
Nonprofits around the country are holding their breath to see if payment in lieu of tax programs will take hold in their areas. PILOT programs have gained steam on the east coast, according to MiBiz, and could represent a new budget hurdle for tax-exempt organizations.
Under the program, municipalities have the ability to send invoices and bills to nonprofit organizations, regardless of their tax status. Not all nonprofits have been treated equally under the legislation, with many states going after colleges and universities. In many areas, the new program is not a huge surprise.
The reason behind the program in most municipalities is that local governments are struggling to generate revenue so they can begin climbing out of the financial pits that were created during the recession. Massive unemployment and government cutbacks left many local governments in a tough situation.
Nonprofits must shore up budgets to prepare for new costs
Regardless of how nonprofit leaders feel about the legislation, it's another example of why they will need to continue to get creative with budgets and revenue. Many organizations are also feeling budget pressures and during a time when their services are needed most. Increased demand and costs coupled with falling revenue have created the perfect storm for many nonprofits.
Nonprofits can save on unemployment insurance
While the PILOT program represents a hardship for tax-exempt organizations, they are still extended one large cost-saving benefit – the ability to opt out of state UI tax pools. Nonprofits are exempt from federal taxes related to UI, but still must contribute for their state costs. Federal taxes cover most of the administrative costs of running unemployment offices while state taxes provide funding for claims.
For-profit businesses pay a tax every year regardless of their actual UI claim costs, nonprofits can become self-reimbursing employers, a designation under which they reimburse the state only for the actual amount that was paid out to former employees. This means that a nonprofit with no UI claims would have no costs.
The downside is that organizations which opt out can be responsible for a large cost if they see a sudden spike in UI claims and will not have money from the tax pool to help meet the obligation. For this reason, nonprofits that opt out should consider enrollment in a UI savings programs or bonded service program such as those offered by First Nonprofit Companies. Saving programs allow nonprofits to capture many of the benefits of being a self-reimbursing employer with much less risk.
There is a not a one-size-fits-all solution for self-reimbursing employers so it's important to get in touch with a nonprofit UI specialist that can explain how different funding options will save the most money while providing the greatest amount of coverage. Depending on their size, most nonprofits can find a more cost-effective option for meeting their SUI responsibility.
For information on how your organization can cost-effectively meet its unemployment insurance needs, contact First Nonprofit Companies at FNCUI@firstnonprofit.com or visit www.firstnonprofitcompanies.com.
Ready to chat? Get in touch today to request a no-obligation savings evaluation.
We first started using First Nonprofit’s Unemployment Savings Program when we were a small startup nonprofit. We didn’t have an HR department and needed expertise in the event that an unemployment claim was made. We knew we were eligible to be a reimbursing employer, but weren’t sure how to navigate that process. They made it easy to set things up, plan for, and then manage claims when they came at a very reasonable cost. The amount of time and stress they’ve saved us dealing with all this has been worth way more than the cost. We’ve now grown to a large nonprofit and do have an HR department but have no plans to stop using their services. I highly recommend them to every nonprofit I come into contact with!
Throughout our membership in the Unemployment Savings Program, First Nonprofit understood our demands, community dynamics, and the importance of seamless services; that allowed us to serve our constituents better.
Because INCS advocates for the operating conditions that allow charter public schools to provide high quality public education, partnering with First Nonprofit was an easy decision. First Nonprofit’s unemployment programs provide our member schools two operating elements crucial to their ability to provide high quality public education: savings and budget certainty. Capable, committed teachers are the key to student success. By participating in the unemployment insurance savings plan, charter public schools gain peace of mind and are able to invest more money in their teachers.
It has been our sincere pleasure to maintain a strong, vibrant business partnership with First Nonprofit. We greatly admire their strong industry knowledge, technical expertise, constant professionalism, knowledgeable and dedicated staff. They are always extremely responsive, personable and provide us with the necessary guidance and recommendations on a numerous variety of employment scenarios.
NYCON members who use First Nonprofit’s programs enjoy enduring savings and improved efficiency. Our association knows that success, because from the beginning, we achieved the same great benefits. Great savings, seamless technology, and responsive service. NYCON highly recommends First Nonprofit’s remarkable unemployment solutions.
Visually Impaired Preschool Services has been a client of First Non-Profit since it was first offered as a benefit of VisionServe Alliance. We completed a thorough evaluation of cash savings to our agency before taking advantage of this wonderful benefit and it has been a very wise decision. Our experience with the processes from accounting to claims have been professional, expeditious and easy.
Luckily for us, our interactions regarding any issues with staffing has been very minimal! I can say that all other interactions with regards to billing, 941 reporting, etc. have been extremely pleasant, accommodating and easy to work with. Kim Ghanayem is always prompt, professional and friendly. Thank you so much!
First Nonprofit has been easy to work with and makes the administrative process easier and smoother. We enjoy working with you.